The Center for Responsible Lending (CRL) recently issued a brief highlighting the ways in which banks abused their customers,, using a practice known as advanced deposit loans. Six banks were making predatory payday loans to their own account holders until the FDIC stopped them in 2013.
Wells Fargo, US Bank, Regions Bank, Fifth Third Bank, Bank of Oklahoma and Guaranty Bank siphoned $500 million annually from customers they caught in a devastating debt trap of triple-digit interest rate loans structured just like storefront payday lending.
Besides being dangerous, we know payday lending is incredibly unpopular. A recent poll by Americans for Financial Reform and CRL finds broad bipartisan support for protections against payday lending. But that hasn’t stopped some from supporting the practice. CRL’s brief was released shortly after Rep. Hollingsworth (R-IN) introduced legislation that would allow banks to re-enter the payday loan space.
As CRL points out, we’ve been there and done that – and it didn’t end well. See for yourself why Rep, Hollingsworth’s proposal is a bad idea and read CRL’s report on advanced deposits.